FSA publishes Journey to the FCA paper

The Financial Services Authority (FSA) has published the Journey to the FCA, a paper that sets out how the UK’s new financial conduct regulator will operate. The Financial Conduct Authority (FCA) will start work next year with a remit to make financial markets work well so consumers get a fair deal.
Speaking at a Thomson Reuters Newsmaker event in London yesterday to mark the launch of the paper, FSA managing director and ceo designate of the FCA, Martin Wheatley said
“The FCA offers a huge opportunity for the regulator and firms to start afresh, and work in partnership to reset how we deal with conduct in financial services. We see it as the role of the regulator to not only make the relevant markets work well but also to help firms get back to putting their customers at the heart of how they do business.”
Wheatley outlined the changes in approach that will be taken by the FCA. The FCA will aim to learn the lessons of previous issues such as PPI mis-selling by taking earlier and more decisive action to deal with problems early. It will devote more resources to analysing possible risks and looking at cross-industry issues to assess the cause of problems.
This approach will be backed by new powers that will allow the FCA to ban products and promotions if it believes that they create risks to consumers. The FCA will also promote effective competition in the interests of consumers. Speaking about its competition role, Wheatley said “In our work here, and in other areas, I am very conscious that we have to work with firms. Making regulation work better for us is also about allowing firms room to try new ideas and develop their business.
Promoting competition will play an important part in this. We are not here to stand in the way of progress that will be of benefit to consumers. Our goals as the FCA are clear: we will work for an industry that is better at serving the needs of its customers.”
The FCA will also continue with much of the FSA’s existing work–for example preventing unauthorised firms from trying to rip-off consumers and taking enforcement action for cases of wrongdoing.
The FSA is asking for comments about the plans for the FCA and the consultation period runs until 14th December.
Maggie Craig, director of Financial Conduct Regulation at the ABI said “The FCA’s approach to regulation must be about improving consumer outcomes. Its report rightly recognises the importance of promoting competition in the interest of consumers, and better understanding their needs, as well as the firms and markets it will regulate. The report builds on insurers’ work to embed the principles of Treating Customers Fairly and we look forward to working in partnership with the regulator to take this further.
Regulation must not be developed in isolation from public policy objectives. It is vital that the FCA’s work supports wider initiatives, such as getting an ageing population saving for retirement, reforming long term care funding and improving consumer access to financial products that meet their needs.
The ability of the FCA to play a role in debates on regulation in Europe is now increasingly important, so we welcome its commitment to influence European policymaking.”
David Thomson, director of policy and public affairs at the Chartered Insurance Institute(CII), comments “There is no doubt that the new FCA will be a tough, pre-emptive and interventionist regulator. The challenge will be for the FCA to regulate in a way that promotes and produces better outcomes for the public rather than just increasing the complexity of regulation for the industry. We welcome the new regulator’s emphasis on placing culture and behaviour at the heart of the new regulatory approach. As the leading professional body in this sector, the CII has been calling for some time for the regulatory system to take greater account of the behaviour of firms as well as individuals. We look forward to seeing how the FCA will not only identify and punish poor and unethical behaviour but also encourage firms’ intentions to go beyond mere compliance with initiatives like the CII’s Corporate Chartered title and Aldermanbury Declaration initiatives, which aspire to promote higher standards to the public.
But the proof will be in how this is exercised, and whether the ends for the public will justify what may appear to some as draconian means. The FCA must develop its approach flexibly to take into account other sectors than banking–and have a proper risk-based approach based on measures that reflect the public interest."
The British Insurance Brokers’ Association (BIBA) has welcomed further clarification.
Steve White, BIBA’s head of Compliance and Training, said “We welcome the signal in the paper that the FCA will work closely with trade associations going forward. We have been in regular contact with the FSA as they have put their plans together and we will continue this as the transition to the FCA happens. However, we continue to remind the regulator that regulation needs to be appropriate, proportionate and cost effective.”
BIBA has been working with politicians and Lords to suggest amendments to the Financial Services Bill so that the government can ensure there is downward pressure on costs for brokers, and that regulation is proportionate to the low risks that brokers pose.
Eric Galbraith, BIBA’s chief executive, added “Regulation is the big issue on members’ agenda. The paper from the FSA is a positive step but we still want certainty from the government that the cost and style of regulation is proportionate to the low risk and nature of insurance brokers. We are not asking for light regulation, but the right regulation and are looking forward to working even closer with the FCA.”